Ep. 70: What Does My Operational Data Mean—And How Do I Use It
Have you ever wondered how you can use your operational data to find your blind spots and improve your business? Learn from Jeff Wiberg, CEO of Family Resource Home Care and Tim Murray, Founder of Aware Senior Care and TeamElderCare Consulting as they break down how to effectively use data as a part of your growth strategy.
Connor Kunz (00:08):
So Jeff, Tim, thanks again for joining us on here. I’m excited to pick your brains a little bit and learn from you both. So first off, we’ll both through what is operational data, what data to focus on which data can be used to effectively measure, change, underuse data, data for business outcomes, and then we’ll answer everybody’s questions. We’ll make sure and save some good time for that. So, first off, when we say operational data, what are we referring to it exactly. Like it sounds it’s data that’s produced by your organization’s day to day operations, as you’re probably thinking right now, that can mean a lot of different things. There’s a lot of data that comes from that. There’s a lot of data that can use to make a lot of different decisions. So part of our goal with today’s conversation is to help, you know, how sort through the mountain of available data in your agency and figure out what is going to be the most useful in making your decisions and making the best decisions to grow your business. So with that being said, let’s start off with some more general questions here. How does measuring operational data improve business performance?
Jeff Wiberg (01:28):
Thanks, Connor. I appreciate the opportunity to be able to be with you all. And I, I, I apologize ahead of time if anybody thinks that data is a little bit boring, but I’m, I’m one of those that believes that data is actually is very exciting. I love diving into the data, so I’m a bit of a data nerd. But my answer to the question in is how does data actually change your business performance? And I would say it doesn’t, I guess we could wrap up the panel now in all, in all seriousness data really just informs decision makers. So regardless of how you look at your data whether or not your collecting data it really does come down to fundamentally how you are influenced by the data and how it’s going to influence your decisions. And I, I, I think that some of the naysayers regarding data, you know, the people who are maybe the anti data nerds out there might say I don’t, I don’t like looking at data.
Jeff Wiberg (02:28):
I don’t think that that’s good. I, I, I manage with my gut and I, I love the quote that says the gut is for digesting food. It’s, it’s not for managing a business. And what, what I think people actually mean when they say I manage by my gut is, is the really I being their, their past experience. They’re, they’re describing that, Hey, I’ve seen scenarios like this before, and I know what to do, and that really is data. So data is meant to influence you, but when you’re managing without really understanding what is the data that you’re looking at, making sure that it’s a complete picture you could end up making decisions that are based upon half truths and that that could send you down expensive rabbit holes or cause you to miss a few things. So I, in my opinion, in deliberately and thoughtfully collecting data that helps you to drive decision making is huge, hugely key because ultimately it does three things.
Jeff Wiberg (03:29):
It empowers, it empowers you to be able to narrow your focus really work on the area of the business that is going to move the needle the most. An example of that I’m gonna be talking a lot about data today around hiring and, and retention recruitment, because I think that that’s one of the universal challenges that a lot of us are facing right now. And so for example, because hiring is become tough you could see application volume as shrinking. And so you need to identify whether or not maybe additional investments are, are working in your application volume, but it could, unless you look at the full picture, you may miss that maybe conversion of applications is maybe a better, better data point. So I think that maybe I identifying what are the right data points to be looking at is really what’s going to empower you.
Jeff Wiberg (04:24):
The second thing is, is it validates the decisions that you’ve already made? So for example if did your volume go up is it level two is it in concert with the return on investment for the dollars, if you were in generating more applications, for example, and then looking at the quality of hire and, and ensuring that you’re getting the right kind of caregivers coming in your door that stick around and that are doing a good job. Those data points combined really help you to validate your decision to maybe invest into sourcing more applications. And then, and third and, and final. And I think this one’s actually the most important for any decision maker, which is, it tells you stories that you need to hear, not necessarily the ones that you want to hear.
Jeff Wiberg (05:13):
So let’s say that the real story that’s going on in our example of, of lagging applications is, is not that you’re are not getting enough, but that you’re chasing off the ones that you have by failing to work them properly. It’s actually about a workflow issue. So slicing and dicing your data can really get at the real root causes of any problematic areas or identify the, the successes that you’re having and help you to make decisions. And, and that’s what I believe data should be all about in helping to improve your operational performance.
Connor Kunz (05:48):
Great. Thanks for that. And I really like what you said about how it doesn’t, you know, it’s, you have to take action on the data and use it to inform decisions. It doesn’t do it passively on its own. Tim, what’s your take?
Tim Murray (06:03):
Yeah, well, I, I, it’s kind of, Jeff had some great points. I’m military trained. So you may hear a couple of military analogies, but I think of measuring operational data as your early warning system, right? And you got an incision to make, could have the business run you, or you can run the business and without measuring operational data, the business may end up running you. And I agree with Jeff, don’t run the business on your gut. So the measuring operational data gives you the terrific opportunity to measure the health of your business, right? We all go for an annual physical, well think, think of the business you will set. And we’ll talk about this shortly about what are those measurements, but you’ll set some parameters that there’s a band that you wanna operate in. In the military. I was nuclear powertrain. We used to call out operating in the green band.
Tim Murray (06:53):
So there’s some things you’re gonna look at like profitability, how many hours you’re booking weekly. We can go on this. And Jeff and I will talk about these data points, where you look at it and go, I’m right where I thought I’d be and right where I want to be. And if you’re not, it gives you the facts and stuff to dig into, not rumors, innuendos, or gut fields. Data is data. If you’re measuring it for properly, you understand what it represents in military fashion. I’m a sailor as a submarine, it allows you to steer clear of the shore water. If you’re not conversely, if you’re not measuring operational data, you put yourself at risk where you can get into a situation where you can’t change the outcome no matter what you do. And that’s why I like to think of it as an early warning system.
Tim Murray (07:41):
And there’s some purity you’d be measuring these data points. And and we’ll be talking about what those points are and some benchmarks. So I I look forward to it. I’m not a data geek. In fact, it wasn’t high on my list, but it’s kind of like, if you’re the leader of your, you, you have to do the, this, or you don’t have to, but I highly recommend you do this. It allows you to, I make intelligent decisions about your business and also empowers you and your employees. And we’ll get to that link too, how it can empower your employees with, with the data.
Connor Kunz (08:15):
Great. Thanks for that, Tim. Sure. and I would just kind of add to that too briefly. You know, being someone who’s probably not naturally a data nerd, either I found it can actually be a strength because it kind of forces you to hone in on whatever the most important data is versus being, you know, just absorbed in, in everything that there is to look at. So for the people listening to who don’t brand themselves as the data nerds of the industry there’s a lot of hope and in some ways that can be helpful. So next question here, what areas of operational data should an owner focus on? Tim will start with you.
Tim Murray (08:57):
There’s certain key measurements that you just got to pay attention to and to hit on Jeff’s point today’s problem, a no brainer attracting and retaining great people that should be, or is the number one issue. And this, so the first, the data points that really were home care pulse, all put in a plug for home care. Pulse was crucial to was measuring caregiver satisfaction. And for us, our goal was 90% or above client satisfaction, similarly, 90% and above. And the key one caregiver retention, how well I like to look at it positively. You can look at turnover. I had a tendency to look at retention and how well are you retaining people’s and also looking at your first 90 days, cuz your first 90 days are typically the critical time period where you’re gonna make or break people and you really need to be on top of it to improve retention.
Tim Murray (10:00):
So those, those are the data points. When we did our annual plan and we used a smart goal setting system and I presented to our staff guys, here’s where we’re heading. Those are the keys. And then of course you’re gonna have what your revenue goal is, grow sales, your gross profit, weekly scheduled caregiver hours. And there’s more data points, but basically those are the key health indicators. And if, because if you don’t have quality of care, probably the rest of the stuff’s not gonna matter a whole lot. And if you’re not taking care of your employees as your number one asset, you’re probably not gonna last very long. So you, you, there’s a bunch of data points and I’m sure Jeff there’s right. You get, there could be like 20 or 30 things we can list, but there’s a top five and those are it. And in my book that you had to nail, and if you weren’t doing well, you needed to focus on and that’s where home care pulse. Once a month we read our report, we read everything. Every single caregiver survey, every single client, there was gold in those Hills. And those are things we operated the, the key and there’s more than that. Love to have discussion, but I wanna make sure you have adequate time and Jeff to jump in, but those were the key ones that we measured.
Connor Kunz (11:27):
Great. Thanks for that. And actually, before we jump to you, Jeff, let me kind of reframe this question just a bit because I like, I like how Tim said something and I think this will make for an interesting response from you, Jeff. So something that Aaron, my Aham who was the original founder of home care pulse, always emphasized was to understand, you know, let’s say that you’re stuck on a desert island and you are, are still managing your business from afar or at least learning about it. And the only way that you can know about the operations of your business are that each day someone sends you five numbers in a message in a bond. What are those five metrics going to be for you, Jeff, that would help, you know, the operational health of your business?
Jeff Wiberg (12:17):
Well, you know, I, I, I agree with Tim on, on the most important components. You know, I, I would wanna know ours. I would wanna know my net gain of caregivers, cuz that’s gonna be, you know additions, my nutrition. I would wanna know hours per caregiver cuz that’s, that’s gonna get at some utilization information. And I think, see, limit limiting me to five man. That’s that’s hard cause I like a, I like a big dashboard. After that I would say margins, this is protecting your margin. No, you know, no margin, no mission. And then then I would say satisfaction after that, that that’d be my five. So very, very in line with what Tim is describing. The, the, the one thing I want to add Connor would be that I, I want people to think of this in is being ecstatic.
Jeff Wiberg (13:18):
So I mean I even saw in the chat, you know, somebody was acting like, okay, what’s the north star. And, and I appreciate the question. And I appreciate that folks want to have a limited set of data. They should be watching at all times, but it’s a little bit like flying an airplane, you know, they’re, there are five have main dials that are gonna tell you the basic health and welfare of the airplane, but there are going to be up to a thousand switches and, and indicators beyond that, that if something’s wrong with one of those main five, you’ve got to be willing to dig deeper. And so in, in my opinion, this is, or, or maybe even think of it a little bit like our vitals, you know, yes, we, we wanna know what our heart rate are. We wanna know what our blood pressure is.
Jeff Wiberg (13:59):
We wanna know what our weight is, and it’s gonna tell us a lot about our overall health, but if something is off, we need to be willing to dig deeper. And, and sometimes the indicators that are, that are most important, don’t change a whole heck of a lot, which means it’s not it’s not informing day to day decision making. And so what I, what I would say is that being willing to be nimble and say what’s important now is, is a critical decision making process for identifying what are the data points that we need to be paying attention to right now to solve the issues of right now. So for example, going, going back into recruiting and retention, I love what Tim was describing about looking at retention and retention by tenure. So how many caregivers make it past 90 days is, is a great indicator as to whether or not you’re hiring your own problems or maybe failing to provide enough training.
Jeff Wiberg (14:56):
And once, once we’ve maybe identified that we have a 90 day turnover issue, then you have to dig deeper. That deeper becomes about, alright, do we have a quality problem on the front end that we’re not doing a good job screening? That’s a hypothesis that we can test through data, we, or are we not providing a great onboarding experience in, in, in setting up our caregivers to be super successful and that can also be tested through data. So as you, as you’re identifying your problems, you gotta form these hypotheses that will help you to dig in to find out more information about what you’re trying to, to run. But I’ll give you a couple more examples on the recruitment and retention side. So I would look at your return on investment by channel, you know, as you spend money on indeed versus Craigslist versus Facebook jobs versus your local search sites, or what have you how many caregivers are you yielding and how many of those caregivers are making it past that magical 90 day mark, that tells you a lot about the ROI that you’re getting, cuz you don’t wanna necessarily just change chase volume, you wanna chase the quality.
Jeff Wiberg (16:00):
And so that, that can really focus your time and energy because at the end of the day, whatever person or, or persons that are responsible for doing recruiting have a fixed amount of time. So focusing their time on, on the best ROI is gonna get you what you need. I, I would say turnover’s fantastic, but turnover by length of, of, of stay turnover by source turnover, by tenure turn turnover by cohort or demographic stratification that can be really informative as to where you need to focus of your retention efforts and, and pinpoint the right engagement strategies because you can’t do, you know, scorched earth strategies in home care. We just don’t have the kind of margins to be able to address everything. So addressing the most important thing becomes super critical conversion rate on applications to caregiver, this, this can help you to focus your funnel and make sure that you’ve got the right process for, for dealing with your applications and, and, and, and ensuring that you’re getting the maximum amount of quality caregivers coming into your into your organization. And then and then caregiver satisfaction the number of training hours or, or training engagement that you have the can all really inform your recruiting and retention strategies. And, and there are certainly dozens more that we could go over, but the principle that I would want people to really take away is don’t be static and be willing to dig deeper. And the way you get that Digger, that deeper dig is, is through forming those hypothe.
Connor Kunz (17:35):
Love to hear it. Thank you for that. And thanks for being willing to roll with the punches as I change up the question just a little bit, keeping you on your feet a little bit. Okay. Let’s, let’s go on to number three here. Jeff, we’ll start with you. And I mean, this, this really we’ve kind of addressed this, but let’s, let’s just see, are there additional answers you would give to this? What are the operational data points that provide the biggest leverage for change in a home care business?
Jeff Wiberg (18:06):
So I, I really love your use of the word, leverage your Connor. And the idea of leverage is where you can put a little bit of effort and get a lo a lot of effect on the back end. And so for, from my perspective especially during the labor crisis that we’ve been facing some of the things that I focus in on are our per caregiver, because if we can’t get more caregivers, let’s get more out of the caregivers hours per client that also levers up cuz you don’t, you don’t have to bring on new clients to be able to increase your hours. You just increase the hours per client lifetime value of a caregiver and lifetime value of a client. Those are, those are things that home care pulses benchmarks. And I think that those are incredibly informative as though drive up the overall efficiency and effectiveness of your organization are definitely going to be go up.
Jeff Wiberg (18:55):
So that’s, that’s a good example of the concept of leverage. I also think that margins is something to, to really pay attention to here because like, you know, like I, I, I love the phrase of no margin omission, cuz we all very much are very altruistic in the way that we approach this. But at the end of the day, if there’s no margin, you cannot continue doing the altruism that we, that we all aspire to. So from my perspective, watching those components and ensuring you’re getting the right kinds of returns off of these investments that’s where leverage really belongs. And then, you know, with my example of hours per caregiver or lifetime value of a caregiver, you don’t have to add caregivers necessarily to be able to add the value. So that’s, that’s where I, I think that identifying the levers in your business that that drive the overall success without having to do a lot of investment is, is a really solid way to create leverage
Connor Kunz (19:57):
Really great points on that. Tim, what’s your take?
Tim Murray (20:00):
Well, I wanna make sure the audience that there’s so much value to measuring these data points, but what, what really got leverage? We got leverage with my, my staff, Jean and I, and our staff by being transparent and by sharing these data points, you’re armed with facts and we, they feel like they’re part of the process and they take ownership of their particular area. So I wanna make, there’s a bigger picture of why these operational data points are, are so important. We’ve discuss the number of things about caregiver, satisfaction, retention and so forth. A couple things that are overlooked and may be underused by agency. Something is very valuable to me and it’s going like Jeff with hours per caregiver is you have the ability to monitor the quality and mix of your cases. And what do I mean by that? How many 24 sevens do you have?
Tim Murray (20:54):
What are the average numbers per client? I think I thought of our portfolio as a mix and we have personal care, companion care, community care and 24 7 case this and why this is important. You can get caught in your business. We all know we hit by that three or 4 24 sevens and went away and oh my God, what do I do? Right? You pray a lot and they come back and they do, you know, I think God rewards people who have the right heart and, and the right approach. But I almost felt like a financial advisor management portfolio and very good mix of cases and community care is very steady when you’re in a community and you’re embedded into IL. It almost runs outta itself when you get in a rhythm and you can count on it and you don’t have that this client died and 24 7 goes away.
Tim Murray (21:42):
So an operational data point, you gotta break your revenue down by client case it. And what it did for us is we set a policy to our staff almost on sometimes a weekly basis cuz we couldn’t, we, we couldn’t meet the demand at times of the types of cases you want to take and maybe put like, we’re gonna do a six hour minimum on a day or an average case. I won’t accept anything less than 30. It allows you to, to set rules and policies that your staff embraces and runs with, cuz you want quality cases that you can staff. So I mean, we can go on and on there’s other things that’s really cool if you’re having a retention program. And by the way, we used our home care pulse surveys for clients and caregivers and built a 90 day caregiver retention and benefit program.
Tim Murray (22:33):
We focused on that to improve all. And we came up with things we’re gonna do to maximize and put ourselves position to retain our caregivers. So having the data allowed you to come up with programs to object to particular problem. The one thing we was cool thing is we measured in clear care. We were clear care users. We call client kudos. We created a tag. Anytime one of our staff got a, you know, Melissa was wonderful from a client. We put a tag in the record and we track monthly kudos. And if they were going down, I go, what’s going on? Why didn’t we have a good kudo month? You know, we’re not communicating with our clients enough, not reaching out for them enough. That’s another great data point. Another one number of unexcused callouts initially in the early years, I dunno if you all have little, little emergency callouts and you know, people calling out without an excuse, we started tracking those and as we built better caregiver retention and satisfaction programs and did a better job hiring the, we virtually eliminated on, on excuse call outs, but we tracked call outs.
Tim Murray (23:35):
You know, you don’t know you have a problem unless you’re tracking these things. So that’s just another data point, you know, to, to Jeff’s point, you start at a high level and then you add these lower levels of indicators to get to the heart of the issue so you can and address it. And I love the discussion of retention. We knew what our funnel was. We knew that every, we had a benchmark and I actually had in part of the comp plan for our recruiter, our goal, what, when we exited was five caregivers hired per week. That’s where we were in the growth of our agency. So we needed, we knew we needed at least 10 to 15 to be invited. Half of them would drop out and we’d lose a couple at orientation. So you know, your funnels and you could track your numbers and know and completely agree what you, we, we would track profit our, our return on investment for indeed. And then your caregiver internal referral program, which we determined it was more cost effective for us to offer a healthy bonus to a caregiver for recruiting than it was to pay indeed. So it allowed you to do some analysis on your best channels for recruiting, and then they’ll apply dollars where have the highest impact
Connor Kunz (24:47):
Your focus on the first 90 days that you’ve mentioned several times, I think is really important from our data. At home care poll, 57% of turnover happens in the first 90 days. So it’s a very crucial period to be looking at the caregiver experience. I think we have a question from the, the chat here that I think was really good. Jeff already jumped in and answered this to the person directly, but I will, I just wanna highlight this. So we have someone asking, what’s kind of like the big question, right? Which is what is a good target margin for a private pay agency. I’d kind of like to hear both of your takes on this, just like really quick
Tim Murray (25:27):
In terms of measurements with, with, with gross profit the bar we set there was around 50%. We, we actually averaged a little bit higher than that. When you first start, now you may in the low forties, but you wanna drive that, that number up. The other was owner discretionary profit. We set a benchmark there of, of 15%. That’s important, you know, your profitability’s an important one, the track some people have a lifestyle business and they kind of spend freely. They need to be careful about that, especially when it comes time, if you’re putting yourself position to, to sell your agency. So honestly that, that discretionary profit initially sometimes like 5% pretty low and you’re starting out, I needed to be more careful, got more frugal. And we, we drove that up to at point of 20%, which I was more happier with.
Tim Murray (26:14):
So those are the benchmarks that we set. I wanna make sure I wanna put in a, a kudo plug to the owner, Steve Everhart of the senior’s choice. Aaron mark was a home care agency owner in the senior’s choice as we did, when we retired to 14, I got a document in front of me to this day. I still have with the benchmark, Steve was big on benchmarks. It was one of the most valuable thing I learned even before we got into the business of the value of tracking operational financial benchmarks. So just wanted to make sure I made a mention there, cause it really set me up for success instead of failure by, by doing measuring these operational data points.
Connor Kunz (26:52):
Thanks for that, Tim. Great to hear Jeff go for it.
Jeff Wiberg (26:57):
I would, I would just I would qualify a little bit of, of my response cuz I put into the chat that I looking at benchmark, I like a, a 36 to 38% gross margin which is, is lower than what Tim just described. And, and so I’ll qualify it in two ways. One, it does depend on upon the size of the agency because a lot of the smaller agencies may not be able to be in a position to provide a lot of the, the major benefits and so and so forth for, for caregivers and, and whatnot. And that those, those do cut into the margins a little bit. Assuming that you want us to be competitive on the pricing side. And then secondly I think that the, the, the, the bottom line in, in this industry right now is he who has the caregivers is gonna win the battle.
Jeff Wiberg (27:44):
So ensuring that your overall value proposition that you’re offering out to caregivers is highly competitive, is going to make a huge difference in your ability to continue growing. And if you are if you’re not operating efficiently on your administrative side and therefore need to have a higher gross margin it’s, you’re gonna pay the price in the, in the value proposition for your caregivers. So from my perspective, that’s, that’s kind of the way I think about things and, and you know, we we’re able to get a net gain of caregivers every single month. So I think something’s right.
Connor Kunz (28:31):
Great to hear it. And thanks for that perspective, lots of good information to unpack there. Let’s go on to number four. And Tim will start with you, which day to data points are most often over or underused by agencies.
Tim Murray (28:51):
Yeah. I’ll be briefing this cuz we touch apart a lot of this already. I think caregiver satisfaction people have tendency to look at the client and then unfortunately some agency owners I talk to, all they do is talk about the numbers profit, gross, more margin. This is a people business. If you don’t have it right, you’re you, you, you’re not gonna have sustainable business. This is about people. So caregiver satisfaction, I think a lot of times is, is overlooked. And when it should be number one, I’ll look at what Jeff said. My last year in operating aware of senior care marketing sales was not my problem or I, I loved doing it. I was very good at it, but every waking day was how do I take care of caregivers? How are we recruiting? What is our retention? That, that was, that was really my focus and looking at benefits, just like Jeff said, I completely concur with what he said there.
Tim Murray (29:44):
I was looking at PTL. I was looking at the benefits. We were offering them, try cuz we needed to be the best. And, and cuz you’re, you gotta differentiate yourself from all the other agencies, why you, and it should come down to cuz we’re gonna take care of you. We take care of you and that’s your salary, your your overall medical PTO and there’s other things to attention program, but satisfaction. The other is owner’s discussionary profit percentage. I think I didn’t initially really pay enough attention to profit and net profit. And I realized, wow, would perform this business. But I was operating to be business a little bit too wild. I wasn’t being as efficient as I should. So then I started do again into it efficiency with technology, infrastructure, payroll, and things, and brought some cost down and, and, and it helped a lot.
Tim Murray (30:35):
And the last point is I may already made was the quality in mix of your cases. P people should look at their portfolio and look at analyze their business because they could get themselves in trouble by focusing too much on 24 7 or not enough particular areas. So knowing that that data is very valuable to you. So you can match the cases you’re taking on with where you are with your staff. You know, you can’t right. You can only, you only can do what you, what your staff can do. So you’ve gotta be careful about understanding where you are and making good decisions in terms of taking on new business.
Jeff Wiberg (31:14):
Yeah, I completely agree with Tim. I think that what, the way I, I think about that last, last part that Tim just described and I do believe this is under you, lies is productivity measures. You know, I I’ve been in this business a long time and I’ve had the opportunity to be able to do, do diligence on a lot of agencies that are considering an exit. One of the things that I find consistently in this industry is a lack of attention towards productivity, especially of the office. So how do you measure that? You measure it through things like conversion rates, you know, so that that’s both client conversion as well as caregiver conversion. The number of billable hours per full-time staff member is a, is a benchmark that I absolutely love. And I would even take that one, one step further and say, what is your administrative or overhead the SGA portion of, of your overhead as a percentage of a per hour cuz in, in my view, that’s, that’s another way to look at it.
Jeff Wiberg (32:15):
I know some agencies, you know, they have really expensive staff members, but fewer of them. And so looking at it both ways is, is really good ratio. So ratios of staff to the billable hours or census or caregiver census, those kinds of things will help, you know, and benchmark on how efficient you’re being and therefore how effective your staff is, helps you to know where you should be spending maybe a little bit more time and energy on training or maybe even investing into some different staff maybe upgrading, so to speak the, the staff member. And, and, and maybe you’re spending a little bit more money, but you’re able to get a better ROI because they’re able to handle a little bit more I see all the time overstaffing cuz we, we want to do all things and, and be all things to all people.
Jeff Wiberg (33:05):
And therefore what we’ll do is we, we hire and we hire and we hire and we hire and our ratios continue to drop. So our overall productivity drops and what almost always suffers is the profitability of the business. So going back to what Tim was saying that you’ve got to protect that profitability is, is super important. I think also just kinda, I guess talking a little bit about creating value in your business, looking at what’s referred to as kegar or the cumulative annual growth rate is something that is very underutilized for somebody who’s considering developing some, some value in the business. And if, if you go on Investipedia there’s some phenomenal, very quick ways to be able to identify the, the formulas to be able to calculate some of this. And the last one I I’ll mention that I think is incredibly underutilized is DSO or days of sales outstanding.
Jeff Wiberg (33:58):
This is a measure of how much AR you have. So accounts receivable that you have as a ratio against your revenue the last 12 months revenue. And the reason why I think this one’s important to watch is if you’re an agency that is growing, growing costs, cash and cash is keying, especially in a service business like our, and if you’re not paying attention to your AR you could literally run out of cash in the midst of growing. So the way to be able to monitor that best is to use a DSO measure. And and, and then hold the individuals that are associated with collecting AR in your agency accountable to a target DSO that, that, that is their performance standard. So I I’m, I’m a fan of having a performance standard in all the positions that that we have here in, in our agency. And I think that anybody who’s running a very efficient and effective shop one of the things that they’ll discover is that their profitability margins are, are solid and that that helps drive a lot of value because even if you’re not trying to sell, you can reinvest those dollars into your growth and that, that just gives you more, more power to be able to grow.
Connor Kunz (35:13):
A few follows here real quick. What is a good DSO target? And then to that, you know, you mentioned the percentage or the ratio of hours to admin team members, what would be a good target number for that as well?
Jeff Wiberg (35:36):
Yeah, so the I’ll, I’ll take the DSO question first that one’s going to be a little bit tough for a, a broad audience. What I would say that can, that comes into play is your terms first. So I know agencies that bill once a week every two weeks, once a month. So your terms are gonna drive a lot of that. What are you tolerating from a terms standpoint? And the terms are not just how frequently you build, but also your grace period that you extend, like if I bill for example, once a month, and I say you have 30 days to pay, then in theory, I could have as much as 60 days of, of, of sales outstanding. And they’re still within my terms. So tightening that CCC or the cash collection cycle is what that, one’s all about.
Jeff Wiberg (36:20):
Tightening that up a little bit, maybe being willing to bill every two weeks, you can tighten down your DSO. You’re, you’re very rarely gonna have a DSO that is, is going to be less than your terms. So looking at what your terms are, is gonna help you to establish a DSO. Maybe 10% of your terms would, would be a kind of a spitball target if you’re over that that’s to Dr. Drive it down, and then if you’re under that, keep it going that you’re, you’re being efficient on your, on your cash utilization. Your second question, Connor was remind me, oh yeah. The, the number of hours per, per full-time staff. So this one is gonna be dependent upon your size and home care pulse does a really good job of benchmarking this particular measure. So if you’re sub 1 million in total revenue, that number’s gonna be quite a bit lower than if you’re larger.
Jeff Wiberg (37:13):
Why, because you should be able to dilute your, your fixed overhead, which you include your admin staff as you grow. If you’re not then, then you’re, you’re, you’re gaining inefficiencies and that’s, that’s kind of where I’m going with the whole productivity measure concept. So I, I can tell you that, for example, right now, I, I go off of one staff member, every 500 billable hours per week. I think the average of the master’s category, if I’m, and I’m totally pulling this off the top of my head is somewhere in the about 4 30, 4 40 range. But it, that master category, I think is north of 5 million in revenue between, so you look at, look at where you stand as a revenue size as an agency, and then drive to the benchmark first and then see if, see if you can even beat it.
Connor Kunz (38:07):
Awesome. Thanks for that. So we are almost outta time here. Let’s kind of hit this one here as a, a lightning round real quick, you know, so just a couple sentences, Jeff, and then Tim how do you data to drive business outcomes? Anything beyond what we’ve already talked about?
Jeff Wiberg (38:25):
Yeah, so the, the one thing I would add to what we’ve discussed today is backing into what right. Looks like. So if you’ve, if you’ve got a target if you’ve got a target, it can help you to create the kind of KPI that you need to be watching. So, for example, let’s say that you lose five caregivers per week. You’re hiring three caregivers per week. So you’re, you’re getting a net loss. That’s, that’s, that’s bad. You need to concentrate on it, right? So you generate 15 applications. And your ratio for hiring is one to five. So you’re hiring 20% of those every single week. Don’t assume at first that your ratio will improve. So what do you need to do? Maybe you need to double your, your advertising spend for generating applications get that volume to 30 app applications so that you can get six hires and stop the bleed.
Jeff Wiberg (39:20):
Then what you do is concentrate on training to get better conversion. That’s, that’s gonna be you’ll start out with the same spend that we’ve already got, but you now are getting eight hires instead of just the the six before. If, if you’re to the point now that you’re actually getting too many, you can back off at the spend at this point, but more likely the ROI is still gonna be there to get those caregivers to work. And that’s so what I would concentrate on there then is your dollars per application and trying to drive more efficiency to, and the way you get that is by looking at the ROI per source. And then you’re putting more of your dollars on the sources that are, that are better and yielding the better ROI. Now you’re doing maybe 35 applications but you’re having 10 conversions.
Jeff Wiberg (40:11):
And you’re really being able to grow at a, a solid clip. Then you would concentrate a on reducing turnover so that you’re not losing five people a week. You’re, you’re bringing that down to four or three on average. And I go in that order very on, on purpose, because there are short term ROI initiatives that you can, you can do. And then the long term are at the end, the end being, you know, retention initiatives. Those always are longer burn. So you back into what you need to get by concentrating on the stuff that will get you the fastest ROI, and then build out from there. Being willing to manage the business that way you can be very responsive.
Connor Kunz (40:55):
Tim, what’s your, your take really quick?
Tim Murray (40:57):
Well, the short firm think strategically act tactically. So my, you know, when you say, how do you use operational data to drive business outcomes, your first, what is your business outcome? What, what do you wanna drive to do you, is it your intent to sell your business one day? If so, what is that time period? Or do you just wanna lie lifestyle business? And what I define lifestyle business, you may get up to like 4,000 hours weekly, and you say, you know what, I’m leveling off here. This is where I’m gonna stay. That drives certain indicators. So you gotta decide where you’re headed. And then as Jeff to kind of back into that, okay, for me to do that, what, what do I need to do? What, where, where do I need to drive the business? You know, how big do I want sales to grow?
Tim Murray (41:42):
You know, for us, we, our grew our company, but before we sold it, we did staffing of CNAs. We did community care and personal care, companion care. I looked at where we were, and as Jeff said, where’s the money coming from. Okay. And made intelligent decisions that drove your advertising, like community care, those that understand community care compared to normal home care. They’re two different beasts and you’re gonna attract different type of caregiver. You’re gonna have to pay ’em differently, which drives your tactics in terms of how you’re advertising, what are you doing to recruit them, how you’re paying and so forth. So you need to your business outcome decide where you want to go. And then back into that and analyze how you’re gonna get there and where the money’s coming from, and then, then apply the app. But there’s a lot more to it, but that’s kind of the short answer. You need to know your business, you need to understand it. And if you’re selling your business, you certainly to stand up in front of investors or whoever’s gonna buy it and show them, you understand your business to do that. You need to present all these data points, right. And know them and explain them and, and tell ’em how they do. Good. So I’d love to talk more about it, but we’re outta time
Connor Kunz (42:59):
Focus on the outcomes you wanna achieve and go backward from there. Great advice. Thank you for that. Thanks to both of you for sharing your wisdom today and for all you do for the industry. It’s very appreciated, and I know that you’ve given a lot of great knowledge here today.
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